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The Fair Value Option of IAS in the Context of Fair Value Accounting - The Practical Application in Financial Institutions
University of Gävle, Department of Business Administration and Economics.
2008 (English)Independent thesis Advanced level (degree of Magister), 10 points / 15 hpStudent thesis
Abstract [en]

Research Question/ Purpose: Due to the increasing importance of international financial markets the significance of IAS 39 rises enormously. IAS39 deals with the measurement and recognition of financial instruments. One major aim is the valuation of the instrument at fair value. Therefore, the purpose of this paper is the examination of the major characteristics of the Fair Value Option (FVO) of IAS 39 and its affect on financial institutions.

Design/Methodology/Approach: An interpretative research philosophy is chosen in order to write the thesis. Therefore, the annual business reports of four major European banking institutions Dresdner Bank AG (Germany), Royal Bank of Scotland Group (Scotland), Nordea (Scandinavia), Crédit Mutuel (France) are examined. The gathered information does not have a statistical value, meaning that it cannot be used in order to develop a general conclusion

Findings: The analysis of the empirical findings and the amended FVO exhibits that banks tends to implement the FVO and FVA instead of applying Historical Cost Accounting. In addition a coherency is drawn between the major results of the empirical study, namely the importance of Fair Value Accounting (FVA).

Conclusion: The conclusion can be drawn, that the FVO presents a milestone towards FVA but that the development is still in process. The FVO supports the reduction of accounting mismatches and facilitates the valuation of embedded derivatives. Furthermore, FVA increases the comparability and transparency of financial statements.

Research Limitations: Due to the limitation of time, only a small number of banking institutions can be analyzed. A second limitation is that the banks have to adapt IAS and IFRS as their accounting standards.

Originality /Value: .The aim of this paper is not to generalize but to prove with the support of a small sample the effects of the FVO on the four selected financial institutions. On the basis of the literature review and the practical analysis the conclusion can be drawn, that in case of the analyzed institutions the FVO presents a step towards FVA.

Place, publisher, year, edition, pages
2008. , p. 90
Keywords [en]
IAS 39, Fair Value Accounting, Fair Value Option
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hig:diva-646Archive number: E3BA: DiVA 077/08OAI: oai:DiVA.org:hig-646DiVA, id: diva2:120226
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samhälle/juridik
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Available from: 2008-06-25 Created: 2008-06-25

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • harvard-cite-them-right
  • ieee
  • modern-language-association-8th-edition
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  • Other style
More styles
Language
  • sv-SE
  • en-GB
  • en-US
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  • nn-NO
  • nn-NB
  • de-DE
  • Other locale
More languages
Output format
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